SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1997

                                       OR

[ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission file number 1-10938

                   SEMICONDUCTOR PACKAGING MATERIALS CO., INC.
                    (Name of Business Issuer in its charter)

                 Delaware                          13-3584740
       (State of other jurisdiction             (I.R.S. Employer
     of incorporation or organization)           Identification No.)

                       1 LABRIOLA COURT, ARMONK, NY 10504
          (Address of principal executive offices, including zip code)

                                 (914) 273-5500
              (Registrant's telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

               (1) Yes [X]              No [ ]

               (2) Yes [X]              No [ ]

     The number of shares outstanding of the Registrant's sole class of common
stock, as of September 30, 1997 was 6,075,116 shares.

                                       1

<PAGE>

PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements.

            Index to Financial Statements                             Page
            -----------------------------                             ----
            Consolidated Balance Sheet at
            September 30, 1997 and December 31, 1996.                   3

            Consolidated Statement of Income
            for the three and nine months ended
            September 30, 1997 and 1996.                                4

            Consolidated Statement of Cash Flows
            for the three and nine months ended
            September 30, 1997 and 1996.                                5

            Consolidated Statement of Shareholders' Equity
            for the nine months ended September 30, 1997                6

            Notes to Consolidated Financial Statements                  7

            Management's Discussion and Analysis of
            Financial Condition and Results of Operations               8-12

Item 2.     Pro Forma Information                                       13

            Pro Forma Consolidated Statement of
            Income for the three months ended
            September 30, 1996 (Unaudited)                              14

            Notes to Unaudited Pro Forma Consolidated
            Statement of Income for the three months ended
            September 30, 1996                                          15

            Pro Forma Consolidated Statement of
            Income for the nine months
            ended September 30, 1996 (Unaudited)                        16

            Notes to Unaudited Pro Forma Consolidated
            Statement of Income for the nine months
            ended September 30, 1996                                    17

PART II     OTHER INFORMATION

Items 1-5   N/A

Item 6      Exhibits and Reports on Form 8-K
            (a)    None
            (b)    None

SIGNATURE PAGE                                                          18

EXHIBITS                                                                19

                                       2
<PAGE>

          Semiconductor Packaging Materials Co., Inc. and Subsidiaries
                           Consolidated Balance Sheet

<TABLE>
<CAPTION>

                                                                  September 30,    December 31,
ASSETS                                                                1997             1996
                                                                  (Unaudited)       (Audited)
                                                                  -----------       ---------
<S>                                                              <C>            <C>
Current Assets:
 Cash  and cash equivalents                                      $  2,554,009    $  3,531,099
 Accounts receivable, less allowance for doubtful
   accounts of $183,000 and  $143,000, respectively                10,283,202       5,637,158
 Inventories                                                       11,281,638       9,078,471
 Prepaid expenses and other current assets                          1,449,470         885,644
                                                                 ------------    ------------
Total current assets                                               25,568,319      19,132,372
                                                                 ------------    ------------
Property and Equipment - at cost, net of accumulated
  depreciation and amortization of $9,289,917
  and $6,444,253, respectively                                     40,085,176      20,700,573
                                                                 ------------    ------------
Other Assets-net of accumulated amortization
 Technology rights and intellectual property                          707,623         749,523
 Goodwill                                                          19,444,086      14,816,454
 Other                                                                852,623       1,090,403
                                                                 ------------    ------------
Total other assets                                                 21,004,332      16,656,380
                                                                 ------------    ------------
Total Assets                                                     $ 86,657,827    $ 56,489,325
                                                                 ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
 Accounts payable                                                $  4,969,151    $  3,462,227
 Accrued expenses                                                   2,348,687         856,810
 Income Taxes Payable                                                 720,474       1,143,518
 Current portion of obligations under capital lease                 1,985,212       1,306,763
 Current portion of long-term debt                                 10,452,859       1,416,000
                                                                 ------------    ------------
Total current liabilities                                          20,476,383       8,185,318
                                                                 ------------    ------------
Deferred income taxes                                               1,313,760       1,470,460
Long-term debt                                                     21,998,596       6,719,333
Obligations under capital leases                                    5,391,107       4,242,415
                                                                 ------------    ------------
Total Liabilities                                                  49,179,846      20,617,526
                                                                 ------------    ------------
Minority Interest in Subsidiary                                     1,473,462       1,932,171
                                                                 ------------    ------------
Shareholders' Equity:
 Preferred stock - $.10 par value; authorized 1,000,000
  shares,none issued                                                        0               0
 Common stock - $.10 par value; authorized 20,000,000
   shares, issued 6,375,116 and 6,355,516 shares, respectively        637,512         635,552
 Additional paid-in-capital                                        28,195,144      28,070,464
 Cumulative Translation Adjustment                                   (602,478)              0
 Retained Earnings                                                  7,774,341       5,233,612
                                                                 ------------    ------------
                                                                   36,004,519      33,939,628
 Less: Treasury stock:300,000 shares, at cost                               0               0
                                                                 ------------    ------------
Shareholders' Equity                                               36,004,519      33,939,628
                                                                 ------------    ------------
Total Liabilities And Shareholders' Equity                       $ 86,657,827    $ 56,489,325
                                                                 ============    ============
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       3

<PAGE>

               Semiconductor Packaging Materials Co., Inc and Subsidiaries
                            Consolidated Statement of Income
                                       (Unaudited)

<TABLE>
<CAPTION>

                                                              For The Three Months           For The Nine Months
                                                               Ended September 30,           Ended September 30,
                                                                  1997          1996          1997          1996
                                                              -----------   -----------   -----------   -----------
<S>                                                          <C>            <C>          <C>          <C>    
Net Sales                                                    $ 13,539,103   $ 8,665,927  $ 33,618,350   $24,862,210
Service Revenue                                                 6,113,620     3,280,446    16,870,038    10,574,227
                                                              -----------   -----------   -----------   -----------
Total Revenue                                                  19,652,723    11,946,373    50,488,388    35,436,437
Cost of Goods Sold                                              9,127,691     5,835,571    23,490,551    17,691,894
Cost of Services Performed                                      4,839,951     1,899,562    12,619,839     5,515,298
                                                              -----------   -----------   -----------   -----------

Total Cost of Goods Sold and
  Services Performed                                           13,967,642     7,735,133    36,110,390    23,207,192
                                                              -----------   -----------   -----------   -----------
Gross Profit                                                    5,685,081     4,211,240    14,377,998    12,229,245
Selling, General and
  Administrative Expenses                                       3,184,670     1,995,643     8,861,308     5,816,359
                                                              -----------   -----------   -----------   -----------
Operating Income                                                2,500,411     2,215,597     5,516,690     6,412,886
Interest Expense (Net)                                            697,575       234,331     1,912,843       653,536
                                                              -----------   -----------   -----------   -----------
Income Before Provision for Income Taxes and
  Minority Interest in Loss of Consolidated
  Subsidiary                                                    1,802,836     1,981,266     3,603,847     5,759,350
Provision for Income Taxes                                        680,160       717,470     1,365,127     2,233,401
                                                              -----------   -----------   -----------   -----------
Income Before Minority Interest in Loss of
  Consolidated Subsidiary                                       1,122,676     1,263,796     2,238,720     3,525,949
Minority Interest in Loss of Consolidated
 Subsidiary                                                        72,892             0       302,009             0
                                                              -----------   -----------   -----------   -----------
Net Income                                                    $ 1,195,568   $ 1,263,796   $ 2,540,729   $ 3,525,949
                                                              ===========   ===========   ===========   ===========
Income per Common Share                                       $       .19   $       .21   $       .41   $       .57
                                                              ===========   ===========   ===========   ===========
Weighted Average Number of Common
 Shares Outstanding                                             6,267,006     6,156,671     6,220,264     6,145,586
                                                              ===========   ===========   ===========   ===========
</TABLE>

                See Notes To Consolidated Financial Statements

                                       4
<PAGE>

                  Semiconductor Packaging Materials Co., Inc. and Subsidiaries
                              Consolidated Statement of Cash Flows
                                           (Unaudited)
<TABLE>
<CAPTION>


                                                                For The Three Months                    For The Nine Months
                                                                Ended September 30,                     Ended September 30,
                                                             1997              1996                 1997                1996
                                                             ----              ----                 ----                ----
<S>                                                      <C>               <C>                 <C>                  <C>    
Cash Flows From Operating Activities:

Net Income                                               $ 1,195,56        $ 1,263,796         $ 2,540,729          $ 3,525,949
 Adjustments To Reconcile Net Income To Net
 Cash Used In Operating Activities:
  Gain on Sales of Property and Equipment                                                          (45,657)
  Depreciation And Amortization of Property And           1,015,447            605,526           3,182,909            1,679,447
  Other Amortization                                        210,896            169,746             585,355              509,238
  Deferred Income Taxes                                                                                                 113,300
  Minority Interest in Subsidiary Loss                       46,008                               (302,009)
 Changes In Operating Assets And Liabilities:
  Increase In Accounts Receivable                          (680,722)          (588,444)         (2,242,769)           (1,872,179)
  (Increase) Decrease In Inventory                          360,360           (831,320)           (818,034)           (1,817,318)
  (Increase) Decrease  In Prepaid Expenses And
   Other Current Assets                                     488,990           (109,114)            636,283              (166,645)
  Increase In Accounts Payable                              171,387            764,310             372,319               558,960
  Increase (Decrease) In Accrued Expenses                  (507,960)           783,039            (625,493)            1,958,530
  Increase (Decrease) in Income Taxes Payable               365,885                               (777,633)
                                                        -----------        -----------         -----------           -----------
Net Cash Provided By Operating Activities                 2,665,859          2,057,539           2,506,000             4,489,282
                                                        -----------        -----------         -----------           -----------

Cash Flows From Investing Activities:
 Purchase Of Property And Equipment                      (2,148,192)          (119,009)        (10,001,490)           (1,914,496)
 Proceeds From Sale of Property and Equipment                                                      275,000
 (Increase) Decrease  In Other Assets                       486,082           (695,042)            206,875            (1,365,438)
 Acquisition of Subsidiary                               (2,007,092)                           (15,134,321)           (6,556,440)
                                                        -----------        -----------         -----------           -----------
Net Cash Used In Investing Activities                    (3,669,202)          (814,051)        (24,653,936)           (9,836,374)
                                                        -----------        -----------         -----------           -----------

Cash Flows From Financing Activities:
 Proceeds from Redemption of Warrants                                            2,400                                     2,400
 Proceeds From Exercise Of Stock Options                     38,590              9,038             126,639               196,969
 Proceeds From Long-Term Debt                             1,389,831                             19,995,464             6,000,000
 Borrowing Under Revolving Credit                         1,450,000                              5,225,000
 Payment Under Capital Leases                              (517,261)          (265,405)         (1,278,400)             (644,259)
 Payment Under Term Loan Agreements                      (1,154,000)           (60,000)         (2,762,000)             (646,166)
 Decrease In Amounts Due Related Parties                                                                                (625,000)
 Minority Interest Contribution                                                984,202                                   984,202
                                                        -----------        -----------         -----------           -----------

Net Cash Provided By Financing Activities                 1,207,160            670,235          21,306,703             5,268,146
                                                        -----------        -----------         -----------           -----------

Effect of Exchange Rate Change on Cash                     (118,458)                              (135,857)

Net Increase (Decrease)  In Cash                             85,359          1,913,723            (977,090)              (78,946)
Cash At Beginning Of Period                               2,468,650          2,251,406           3,531,099             4,244,075
                                                        -----------        -----------         -----------           -----------

Cash At End Of Period                                    $2,554,009        $ 4,165,129         $ 2,554,009           $ 4,165,129
                                                        ===========        ===========         ===========           ===========


Supplemental schedule of noncash investing and 
financing activity:
  Machinery and equipment acquired under capital        $ 1,151,660        $ 1,606,627         $ 2,894,101           $ 2,916,355
</TABLE>


                         See Notes to Consolidated Financial Statements

                                       5
<PAGE>

          Semiconductor Packaging Materials Co., Inc. and Subsidiaries
                 Consolidated Statement of Shareholders' Equity
                  For the nine months ended September 30, 1997
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                 ADDITIONAL                                    CUMULATIVE           TOTAL
                             COMMON STOCK         PAID-IN      RETAINED     TREASURY STOCK     TRANSLATION       SHAREHOLDERS'
                           SHARES      AMOUNT     CAPITAL      EARNINGS     SHARES  AMOUNT     ADJUSTMENT           EQUITY
                           ------      ------     -------      --------     ------  ------     ----------           ------
<S>                      <C>         <C>       <C>             <C>          <C>     <C>        <C>               <C>

Balance at
January 1, 1997          6,055,516   $ 635,552  $ 28,070,464   $ 5,233,612  300,000 $    0     $        0        $ 33,939,628

Issuance Of
Common Stock
Through The
Exercise Of Stock
Options                     19,600       1,960       124,680                                                          126,640

Net Income                                                       2,540,729                                          2,540,729

Cumulative
Translation
Adjustment                                                                                       (602,478)           (602,478)
                         ---------   ---------  ------------   -----------  -------  -----     ----------        ------------
Balance at
September 30, 1997       6,075,116   $ 637,512  $ 28,195,144   $ 7,774,341  300,000  $   0     $ (602,478)       $ 36,004,519
                         =========   =========  ============   ===========  =======  =====     ==========        ============
</TABLE>

                 See Notes To Consolidated Financial Statements

                                       6


<PAGE>

          Semiconductor Packaging Materials Co., Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.   The consolidated financial statements include the accounts of the Company,
     its wholly owned subsidiaries and its majority owned subsidiary. The
     consolidated balance sheet as of September 30, 1997, the consolidated
     statement of income for the three and nine months ended September 30, 1997
     and 1996, the consolidated statement of cash flows for the three and nine
     months ended September 30, 1997 and 1996 and the consolidated statement of
     shareholders' equity for the nine months ended September 30, 1997, have
     been prepared by the Company and are unaudited. In the opinion of
     management, all adjustments necessary to present fairly the financial
     position, results of operations and cash flows at September 30, 1997 and
     for all periods presented have been made.

2.   Earnings per share - Earnings per share are computed using the weighted
     average number of common shares actually outstanding plus the shares that
     would be outstanding assuming the exercise of employee stock options and
     stock warrants during the periods presented.

3.   See the Company's Annual Report on Form 10-KSB for the year ended December
     31, 1996 for additional disclosures relating to the Company's financial
     statements.

4.   On January 23, 1997, American Silicon Products, Inc. ("ASP"), a wholly
     owned subsidiary of the Company, acquired all of the assets of Silicon
     Materials Service and acquired 100% of the outstanding stock of Silicon
     Materials Service, B.V. (collectively "SMS"), a company which polishes and
     reclaims silicon wafers for a purchase price of approximately $12,972,000
     in cash. This business combination was accounted for as a purchase. In
     addition, the Company incurred approximately $500,000 in estimated closing
     expenses and $1,500,000 of costs associated with the integration and
     relocation of certain acquired activities of SMS. The fair value of the
     assets acquired, including approximately $2,183,000 allocated to goodwill,
     which is being amortized over 25 years, amounted to $12,247,000 and
     liabilities assumed amounted to $638,000.

5.   Effective July 30, 1997, Retconn Incorporated ("Retconn"), a wholly owned
     subsidiary of the Company, acquired 100% of the outstanding stock of S.T.
     Electronics, Inc. ("S.T."), a company which manufactures and markets custom
     cable and cable harness assemblies for $1,000,000 in cash and $2,000,000 in
     notes, subject to adjustment, based on the closing net worth and adjusted
     EBIT delivered by S.T. as of the closing date. In addition, Retconn
     acquired certain proprietary rights from the S.T. shareholders for
     $200,010. The notes are payable in twenty equal quarterly installments
     beginning on November 1, 1997 together with interest on the unpaid
     principal at the rate of 7% per annum. This business combination was
     accounted for as a purchase. In addition, the Company incurred
     approximately $300,000 in estimated closing expenses. The fair value of the
     assets acquired, including $2,993,000 allocated to goodwill, which is being
     amortized over 25 years, amounted to $4,431,000 and liabilities assumed
     amounted to $862,000.

6.   Effective August 28, 1996, the Company entered into a joint venture
     agreement to develop a silicon wafer polishing and reclaiming facility in
     Singapore. The jointly owned Singapore corporation, International
     Semiconductor Products Pte Ltd ("ISP"), is 50.1% owned by the Company,
     39.9% owned by a holding company, Semiconductor Alliance Pte Ltd. and 10%
     owned by EDB Ventures 2 Pte Ltd. Accordingly, the Company's consolidated
     balance sheet at September 30, 1997 reflects a $1,473,462 minority interest
     contribution made by the Company's joint venture partner. ISP began
     qualifications for prospective customers in the second quarter of 1997 and
     generated revenues of $303,000 during the three month period ended
     September 30, 1997.

                                       7

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING INFORMATION

Portions of the narrative set forth in this 10-Q that are not historical in
nature are forward looking statements. The Company's actual performance may
differ materially from that contemplated by the forward looking statements as a
result of a variety of factors that include, but are not limited to, the general
economic or business climate, business conditions of the microelectronic and
semiconductor markets and wireless communications industry which the Company
serves, the timely and successful completion of the Company's capital and plant
expansion programs, economic volatility in Asian markets and the ability of the
Company to obtain necessary financing when required.

RESULTS OF OPERATIONS (for the three and nine month periods ended September 30,
1997 compared to the three and nine month periods ended September 30, 1996)

Total revenue for the three and nine month periods ended September 30, 1997
increased $7,706,000 and $15,052,000, or 65% and 42%, respectively, over the
comparable 1996 periods.

In the three and nine month periods ended September 30, 1997, sales by the
Company's Microelectronic Materials Group increased $4,873,000 and $8,756,000,
or 56% and 35%, respectively, over the comparable 1996 periods primarily due to
an increase in demand for its products by the communication and computer
industries. Due to the increased demand for the Company's microelectronic
materials, the Company is in the process of increasing the capacities of its
Polese Company and Retconn Incorporated subsidiaries through the acquisition of
additional manufacturing space and equipment. In addition, S.T. Electronics
("S.T."), which was acquired by the Company effective July 30, 1997, contributed
$870,000 to 1997's three and nine month Microelectronic Materials Group sales.

In the three and nine month periods ended September 30, 1997, revenue derived
from the Company's Semiconductor Services Group increased $2,833,000 and
$6,296,000, or 86% and 60% , respectively, over the comparable 1996 periods as
the result of the inclusion of $2,474,000 and $7,934,000 of revenue in the three
and nine month periods ended September 30, 1997 from SMS, which was acquired by
the Company on January 23, 1997. Revenue generated from the SMS acquisition in
the three month period ended September 30, 1997 decreased from revenue generated
in the three month period ended June 30, 1997 primarily as a result of revenue
reduction issues at the Texas operation and the effect of European summer
holidays on the Netherlands operation. The aforementioned product quality issues
existed prior to the Company's acquisition of SMS. The Company believes that it
has substantially improved the quality of the products of the Texas and
Netherlands operations in the three month period ended September 30, 1997,
enabling those operations to reestablish and improve their future revenue
streams. Revenue in the three and nine month periods ended September 30, 1997,
from ASP's Rhode Island operation, increased $36,000 and decreased $1,961,000,
respectively, from the comparable 1996 periods. The decrease in the nine month
period resulted primarily from a reduction in business with silicon wafer
brokers. While demand for the Company's silicon wafer reclaim services in the
nine month period ended September 30, 1997, was below that of the comparable
1996 periods, ASP's Rhode Island operation has experienced increased demand for
its services in the three month period ended September 30, 1997.

At September 30, 1997, the Company's consolidated backlog was $22,828,000, which
represents a 127% increase since the beginning of the year. Excluding the SMS
and S.T. backlog at September 30, 1997, consolidated backlog has increased 63%
since January 1, 1997. For the nine months ended September 30, 1997 and 1996,
direct sales of the Company's products into foreign markets accounted for 15%
and 10%, respectively, of consolidated revenue. The Company currently maintains
foreign manufacturing operations in the Netherlands ("ASP B.V.") and in

                                       8

<PAGE>

Singapore, International Silicon Products Pte. Ltd. ("ISP"). In the three and
nine month periods ended September 30, 1997, the Company derived $679,000 and
$2,246,000, respectively, of revenue from ASP B.V. and $303,000 and $323,000
respectively, of revenue from ISP. ISP did not have any operations in the nine
month period ended September 30, 1996. ISP is currently in the process of being
qualified by prospective customers in the Asian marketplace. Foreign sales made
through the Company's domestic operations are made through foreign
manufacturer's representatives and are primarily priced and paid for in U.S.
dollars. The Company believes that its revenue has been, and will be, affected
by the cyclical nature of the industries it serves. The SMS acquisition, and the
Company's joint venture in Singapore, further increase the Company's reliance on
the semiconductor industry.

Gross profit for the three and nine month periods ended September 30, 1997
increased $1,474,000 and $2,149,000, or 35% and 18%, respectively, from the
comparable 1996 periods. Gross profit in the three and nine month periods ended
September 30, 1997 from the Company's Microelectronic Materials Group, increased
$1,581,000 and $2,958,000, or 56% and 41%, respectively, from comparable 1996
periods primarily due to increased sales volume and improved margins at the
Company's Polese Company subsidiary. Gross profit from the Company's
Semiconductor Services Group decreased $107,000 and $809,000, or 8% and 16%,
respectively, from comparable 1996 periods. While the SMS acquisition added
$1,600,000 to Semiconductor Services' gross profit, higher depreciation and
lower revenue at ASP's Rhode Island operation resulted in a $2,149,000 reduction
in gross profit. Also included in the nine month period ended September 30, 1997
is $260,000 of gross losses associated with the start-up of ISP. As a result of
the foregoing, gross margin decreased to approximately 29% in the three and nine
month periods ended September 30, 1997 from 35% in the comparable 1996 periods.

Selling, general and administrative ("SG&A") expenses in the three and nine
month periods ended September 30, 1997 increased $1,189,000 and $3,045,000, or
60% and 52%, respectively, over the comparable 1996 periods. Of the $3,045,000
increase in SG&A expenses, $1,645,000 was due to the inclusion of SMS, ISP and
S.T. SG&A expenses in the 1997 period, whereas no SG&A expenses of SMS, ISP and
S.T. were recorded in the comparable 1996 period. SG&A expenses also increased
in the respective 1997 periods due to higher revenues and additional
organizational infrastructure. SG&A expenses as a percentage of revenue
decreased to 16% and increased to 18%, respectively, in the three and nine month
periods ended September 30, 1997 as compared to 17% and 16%, respectively, in
the comparable 1996 periods.

Net interest expense for the three and nine month periods ended September 30,
1997 increased $463,000 and $1,259,000, respectively, from the comparable 1996
periods primarily due to increased interest costs associated with term debt
incurred in conjunction with the SMS acquisition (described herein), interest
costs associated with the S.T. acquisition (described herein) and higher
interest costs associated with capital lease obligations.

A provision of $837,000 and $1,522,000, respectively, for income taxes has been
made for the three and nine month periods ended September 30, 1997 as compared
to a $717,000 and $2,233,000 provision in the comparable 1996 periods, yielding
an effective tax rate of 38% in the 1997 periods compared with 36% and 39%,
respectively, in the 1996 periods. The decrease in the effective tax rates in
the 1997 periods was primarily related to a decrease in state income taxes due
to the utilization of investment tax credits during the periods.

In the three and nine month periods ended September 30, 1997, the Company has
included a loss associated with ISP in its income before minority interest in
loss of consolidated subsidiary, net of tax. The Company has a 50.1% interest in
the joint venture and has accordingly, excluded 49.9% of such loss from its
consolidated net income.

As a result of the foregoing, net income decreased $68,000 and $985,000,
respectively, or 5% and 28% in the three and nine month periods ended September
30, 1997 from the comparable 1996 periods.

                                       9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its capital needs through the proceeds of its public
equity offerings, capital leases, its revolving credit facility and term loans
from banks led by First Union Bank (the "Bank") and cash flow from operations.
At September 30, 1997, the Company had cash and cash equivalents of $2,554,000
and had an available balance on its revolving credit facility of $6,175,000.

Net cash provided by operating activities in the three and nine month periods
ended September 30, 1997 amounted to $2,666,000 and $2,506,000, respectively, as
compared to $2,058,000 and $4,489,000, respectively, in the comparable 1996
periods. While cash provided by net income and adjustments to reconcile net
income to net cash used in operating activities increased $429,000 and $133,000,
respectively, in the three and nine month periods ended September 30, 1997, cash
used to support changes in operating assets and liabilities increased $179,000
and decreased $2,117,000, respectively, in the three and nine month periods
ended September 30, 1997 over the comparable 1996 periods. In the three and nine
month periods ended September 30, 1997, the Company used $320,000 and
$3,061,000, respectively, as compared to using $1,420,000 and $3,689,000,
respectively, in the three and nine month periods ended September 30, 1996 of
cash derived from operations to fund increases in accounts receivable and
inventory. The increases in the Company's accounts receivable and inventory were
made to support increased revenues. In the three and nine month periods ended
September 30, 1997, accrued expenses decreased $508,000 and $625,000,
respectively, as compared to increasing $783,000 and $1,959,000, respectively,
in the comparable 1996 periods. The decrease in the Company's accrued expenses
was due to the payment of costs associated with the integration and relocation
of certain acquired activities of SMS. In the nine month period ended September
30, 1997, the Company had made payments of approximately $2,410,000 for its 1996
and estimated 1997 state and federal tax obligations thereby reducing its
current income taxes payable by $778,000. In 1996, due to diminutive tax
obligations caused by the utilization of net operating loss carry forwards in
1995, the Company was not required to make any material tax payments for its
1996 tax obligations until 1997.

To support the Company's growth in the three and nine month periods ended
September 30, 1997, the Company invested $2,148,000 and $10,001,000,
respectively, as compared to $119,000 and $1,914,000, respectively, in the three
and nine month periods ended September 30, 1996, in property and equipment to
support its growth and expand its facilities and production capabilities. At
September 30, 1997, the Company had capital commitments of approximately
$1,374,000 for the ongoing upgrade of the Company's manufacturing equipment and
facilities. The Company believes that the lease financing available to it for
certain equipment together with cash flow from operations should be sufficient
to fund its capital needs.

On January 23, 1997, ASP completed the acquisition of the assets of Silicon
Materials Service of Garland, Texas, and acquired 100% of the outstanding stock
of Silicon Materials Service, B.V. of Helmond Netherlands. The purchase price of
approximately $12,972,000 was paid in cash, $400,000 of which was paid as a
deposit prior to December 31, 1996. The company also paid $736,000 in costs
associated with the integration and relocation of certain acquired activities of
SMS in the nine month period ended September 30, 1997. The SMS acquisition was
financed through a term loan with the Bank as described herein.

Effective July 30, 1997, Retconn Incorporated ("Retconn"), a wholly owned
subsidiary of the Company, acquired 100% of the outstanding stock of S.T.
Electronics, Inc. ("S.T."), for $1,000,000 in cash and $2,000,000 in notes. In
addition, Retconn acquired certain proprietary rights from the S.T. shareholders
for $200,010. The notes are payable in twenty equal quarterly installments
beginning on November 1, 1997 together with interest on the unpaid principal at
the rate of 7% per annum. In addition, the Company incurred approximately
$300,000 in estimated closing expenses. The fair value of the assets acquired,
including $2,993,000 allocated to goodwill, which is being amortized over 25
years, amounted to $4,431,000 and liabilities assumed amounted to $862,000. The
S.T. acquisition was financed through drawings under the Companys' line of
credit facility with the Bank as described herein.

Effective January 2, 1996, the Company acquired all of the common stock of
Retconn, a manufacturer of coaxial contacts and connectors, for $5,933,000 in
cash. In addition, the Company has paid approximately $986,000 in costs
associated with the Retconn acquisition. This business combination was accounted
for as a purchase. The

                                       10

<PAGE>

Company also issued 15,000 of its common shares, valued at $146,250, in
conjunction with the acquisition. The fair value of the assets acquired,
including approximately $4,696,000 allocated to goodwill, which is being
amortized over 25 years, amounted to $8,033,000 and liabilities assumed amounted
to approximately $968,000.

In connection with the Retconn acquisition, on January 4, 1996, the Company
entered into a term loan with the Bank in the principal amount of $6,000,000.
The loan bore interest at the Bank's loan pricing rate (8.25% at December 31,
1996) with principal payable commencing on February 1, 1997. Interest on the
loan which was payable monthly commenced on February 1, 1996. This loan was
subsequently refinanced in conjunction with the SMS acquisition described
herein.

Effective August 28, 1996, the Company entered into a joint venture agreement to
develop a silicon wafer polishing and reclaiming facility in Singapore. The
jointly owned Singapore corporation, International Semiconductor Products Pte
Ltd ("ISP"), is 50.1% owned by the Company, 39.9% owned by a holding company,
Semiconductor Alliance Pte Ltd. and 10% owned by EDB Ventures 2 Pte. Ltd. In
1996, the Company and its joint venture partner made a total of $4,000,000 in
equity contributions into ISP, which was contributed pro-ratably based on
ownership. In addition, the Company has paid approximately $289,000 in costs
associated with the establishment of the joint venture.

Primarily as a result of the foregoing, the Company used $3,669,000 and
$24,654,000, respectively, in the three and nine month periods ended September
30, 1997, as compared to $814,000 and $9,836,000, respectively, in the three and
nine month periods ended September 30, 1996, in its investing activities.

Concurrent with the SMS acquisition, the Company entered into a $21,000,000 five
year term loan. The $21,000,000 term loan was principally used to finance the
SMS acquisition and to refinance the Retconn term loan. The principal amount
which is payable in 60 consecutive installments of $350,000, commenced on March
1, 1997. The loan bears interest at a Eurodollar rate plus 2.25%. In conjunction
with the term loan agreement, the Company also entered into a $15,000,000 line
of credit with the Bank which is described herein. Pursuant to the term loan and
line of credit agreements, the Bank has a first priority security interest in
substantially all of the Company's assets. The loan agreements provide, among
other things, that the Company maintain certain financial ratios. The Company is
also subject to restrictions relating to incurring additional indebtedness,
additional liens and security interests, capital expenditures and the payment of
dividends.

On January 23, 1997, the Company entered into a $15,000,000 line of credit with
the Bank which expires in February 1999, which includes a standby letter of
credit for ISP in the amount of $3,600,000. Interest is payable monthly at the
lower of the Bank's loan pricing rate or a Eurodollar rate plus 2.25%. At
September 30, 1997, the Company had borrowed $5,225,000 under its line of credit
and did not have any drawings under the standby letter of credit.

In 1997, ISP entered into a S$19,685,000 (approximately $14,000,000) credit
facility with a Singapore financial institution in order to acquire certain
equipment, acquire a building, provide for an overdraft facility and to provide
a multi currency letter of credit facility. Amounts borrowed under the facility
bear interest at an average rate of approximately 6.75%. In the three and nine
month periods ended September 30, 1997, ISP has borrowed $986,000 and
$4,592,000, respectively, under the facility.

In conjunction with the Company's acquisition of Polese Company in 1993, the
Company entered into an agreement with Mr. Frank Polese, the former sole
shareholder of Polese Company whereby, for a period of ten years, Mr. Polese has
the right to receive 10% of (I) the pre-tax profit from the copper tungsten
product line, after allocating operating costs and (ii) the proceeds of the
sale, if any, by the Company of the powdered metal technology. To date, no
payments have been made pursuant to this agreement.

In May of 1993, the Company entered into a $1,200,000 five year term loan
agreement with the Bank. The term loan agreement which calls for the repayment
of the loan in twenty equal installments, commenced on October 1, 1993. The term
loan bears interest at the Bank's loan pricing rate plus 1.5%. The term loan is
collateralized with a blanket lien on substantially all of the parent company's
assets, excluding the common stock and assets of its

                                       11

<PAGE>

subsidiaries. As of September 30, 1997, the Company had an outstanding balance
of $210,000 due on this term loan.

The Company has, and expects to be able to continue to, meet its obligations to
the Bank from cash generated from operations. As at September 30, 1997, the
Company was in compliance with all of the covenants contained in its loan
agreements, as amended.

As a result of the above, in the three and nine months period ended September
30, 1997, $1,207,000 and $21,307,000, respectively, was provided by the
Company's financing activities as compared to $670,000 and $5,268,000 in the
comparable 1996 periods.

The Company continually seeks to broaden its product lines by various means,
including through acquisitions. The Company intends to pursue only those
acquisitions for which it will be able to arrange the necessary financing by
means of the issuance of additional equity, the use of its cash or through bank
or other debt financing.

The Company believes that it has the capacity for growth and that its working
capital and internally generated funds, combined with its bank line of credit,
the proceeds it has received from its public offerings, and from other sources
of financing, will be sufficient to satisfy the Company's currently anticipated
cash requirements on both a short-term and long-term basis.

                                       12

<PAGE>

                              Pro Forma Information

The following unaudited pro forma combined financial statements and explanatory
notes are presented to reflect the acquisition of the net assets of Silicon
Materials Service of Garland, Texas, and 100% of the outstanding stock of
Silicon Materials Service, B.V. of Helmond, Netherlands (collectively "SMS") by
American Silicon Products, Inc, a subsidiary of Semiconductor Packaging
Materials Co., Inc. (the "Company") on January 23, 1997.

The pro forma statements of income give effect to this transaction as if it had
occurred at the beginning of the period presented.

The pro forma information should be read in conjunction with (1) the historical
financial statements for the Company, including the related notes thereto,
included in the Company's Form 10-KSB for the fiscal year ended December 31,
1996, (2) the historical financial statements of SMS, including the related
notes thereto and (3) the Company's Form 8-K and 8-K/A filed on February 4, 1997
and April 7, 1997, respectively.

The pro forma information is not necessarily indicative of the combined results
of operations or combined financial position that would have resulted had the
acquisition been consummated as of the date noted above, nor is it necessarily
indicative of the combined results of operations in any future period or of the
future combined financial position.

                                       13
<PAGE>

                  Semiconductor Packaging Materials Co., Inc and Subsidiaries
                          Pro Forma Consolidated Statement of Income
                                          (Unaudited)
                         For the Three Months Ended September 30, 1996

<TABLE>
<CAPTION>
                                           Semiconductor
                                           Packaging Materials
                                           Co., Inc. and                        Pro Forma                         
                                           Subsidiaries             SMS        Adjustments         As Adjusted 
                                           -----------          ----------    ----------           -----------
<S>                                        <C>                  <C>           <C>                  <C>
Net Sales                                  $ 8,665,927          $             $                    $ 8,665,927       
Service Revenue                              3,280,446           3,639,000                           6,919,446       
                                           -----------          ----------    ----------           -----------
Total Revenue                               11,946,373           3,639,000                          15,585,373       
Cost of Goods Sold                           5,835,571                                               5,835,571       
Cost of Services Performed                   1,899,562           3,113,000     (158,768)(1)          4,853,794       
                                           -----------          ----------    ----------           -----------
Total Cost of Goods Sold and                                                                                        
  Services Performed                         7,735,133           3,113,000     (158,768)            10,689,365       
                                           -----------          ----------    ----------           -----------
Gross Profit                                 4,211,240             526,000      158,768              4,896,008       
Selling, General and                                                                                                
  Administrative Expenses                    1,995,643             402,000       21,829 (3)          2,419,472       
                                           -----------          ----------    ----------           -----------
Operating Income                             2,215,597             124,000      136,939              2,476,536       
Interest Expense (Net)                         234,331                          320,642 (2)            554,973       
                                           -----------          ----------    ----------           -----------
Income Before Provision for Income Taxes     1,981,266             124,000     (183,703)             1,921,563       
Provision for Income Taxes                     717,470                          (24,239)(4)            693,231       
                                           -----------          ----------    ----------           -----------
Net Income                                 $ 1,263,796           $ 124,000   $ (159,464)           $ 1,228,332       
                                           -----------          ----------    ----------           -----------
Net Income per Common Share                $       .21                                             $       .20            
                                           -----------          ----------    ----------           -----------
Weighted Average Number of Common                                                                  
Shares Outstanding                           6,156,671                                               6,156,671
                                           -----------          ----------    ----------           -----------
</TABLE>

            See Notes To Pro Forma Consolidated Statement Of Income

                                       14

<PAGE>

          Semiconductor Packaging Materials Co., Inc. and Subsidiaries
          Notes to Unaudited Pro Forma Consolidated Statement of Income
                  For The Three Months Ended September 30, 1996

(1)  Adjustment which reflects three months of depreciation expense of SMS's
     machinery and equipment and furniture and fixtures at appraised values
     amounting to $10,209,314, assuming an estimated useful life of ten years on
     a straight line basis adjusted by actual depreciation expense of machinery
     and equipment and furniture and fixtures recorded by SMS for the three
     month period ended September 30, 1996, amounting to $414,000.

(2)  Adjustment which records interest expense on a $15,000,000 term note with
     an effective interest rate of 8.36%.

(3)  Adjustment which records the amortization of the excess of the purchase
     price paid for the fair market value of all tangible and identifiable
     intangible assets acquired less liabilities assumed, totaling $2,182,895,
     amortized over an estimated useful life of twenty-five years.

(4)  Federal income taxes have been provided for the three month period ended
     September 30, 1996 primarily because SMS prior to its acquisition by the
     Company, was a division of Air Products and Chemicals, Inc. and therefore
     no provision for federal income tax purposes was made. The income tax
     credit of $24,239 represents SMS's pre-tax income of $124,000 less total
     pre-tax pro forma adjustments of $183,703 adjusted for state and foreign
     income taxes of 10% and federal income taxes of 34%.

                                       15
<PAGE>

                  Semiconductor Packaging Materials Co., Inc and Subsidiaries
                          Pro Forma Consolidated Statement of Income

                                          (Unaudited)
                         For the Nine Months Ended September 30, 1996

<TABLE>
<CAPTION>

                                     Semiconductor
                                     Packaging Materials
                                     Co., Inc. and                    Pro Forma
                                     Subsidiaries          SMS       Adjustments        As Adjusted
                                     -----------------  -----------  -----------       -------------
<S>                                       <C>           <C>          <C>               <C>
Net Sales                                 $ 24,862,210               $                $ 24,862,210 
Service Revenue                             10,574,227  11,633,000                      22,207,227  
                                           ------------  ----------  -----------       -----------  
Total Revenue                               35,436,437  11,633,000                      47,069,437  
Cost of Goods Sold                          17,691,894                                  17,691,894  
Cost of Services Performed                   5,515,298   9,580,000     (573,301) (1)    14,521,997  
                                           ------------  ----------  -----------       -----------  
Total Cost of Goods Sold and                                                                        
  Services Performed                        23,207,192   9,580,000     (573,301)        32,213,891  
                                           ------------  ----------  -----------       -----------  
Gross Profit                                12,229,245   2,053,000      573,301         14,855,546  
Selling, General and                                                                                
  Administrative Expenses                    5,816,359   1,298,000       65,487  (3)     7,179,846  
                                           ------------  ----------  -----------       -----------  
Operating Income                             6,412,886     755,000      507,814          7,675,700  
Interest Expense (Net)                         653,536                  954,957  (2)     1,608,493  
                                           ------------  ----------  -----------       -----------  
Income Before Provision for Income Taxes     5,759,350     755,000     (447,143)         6,067,207  
Provision for Income Taxes                   2,233,401                  124,990  (4)     2,358,391  
                                           ------------  ----------  -----------       -----------  
Net Income                                 $ 3,525,949   $ 755,000   $ (572,133)       $ 3,708,816  
                                           ------------  ----------  -----------       -----------  
Net Income per Common Share                $       .57                                 $       .60  
                                           ------------  ----------  -----------       -----------  
Weighted Average Number of Common                                                                   
  Shares Outstanding                         6,145,586                                   6,145,586  
                                           ===========   ==========  ===========       ===========  
</TABLE>

                    See Notes To Pro Forma Consolidated Statement Of Income

                                       16

<PAGE>

          Semiconductor Packaging Materials Co., Inc. and Subsidiaries
          Notes to Unaudited Pro Forma Consolidated Statement of Income
                  For The Nine Months Ended September 30, 1996

(1)  Adjustment which reflects nine months of depreciation expense of SMS's
     machinery and equipment and furniture and fixtures at appraised values
     amounting to $10,209,314, assuming an estimated useful life of ten years on
     a straight line basis adjusted by actual depreciation expense of machinery
     and equipment and furniture and fixtures recorded by SMS for the nine month
     period ended September 30, 1996, amounting to $1,339,000.

(2)  Adjustment which records interest expense on a $15,000,000 term note with
     an effective interest rate of 8.36%.

(3)  Adjustment which records the amortization of the excess of the purchase
     price paid for the fair market value of all tangible and identifiable
     intangible assets acquired less liabilities assumed, totaling $2,182,895,
     amortized over an estimated useful life of twenty-five years.

(4)  Federal income taxes have been provided for the nine month period ended
     September 30, 1996 primarily because SMS prior to its acquisition by the
     Company, was a division of Air Products and Chemicals, Inc. and therefore
     no provision for federal income tax purposes was made. The income tax
     provision of $124,990 represents SMS's pre-tax income of $755,000 less
     total pre-tax pro forma adjustments of $447,147 adjusted for state and
     foreign income taxes of 10% and federal income taxes of 34%.

                                       17

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                   SEMICONDUCTOR PACKAGING MATERIALS CO., INC.

Date:   November   14,   1997           By:      /s/ Gilbert D. Raker
                                                 ------------------------------
                                        Name:    Gilbert D. Raker
                                        Title:   Chairman of the Board
                                                 and Chief Executive Officer

Date:   November   14,   1997           By:     /s/ Andrew A. Lozyniak
                                                 ------------------------------
                                        Name:    Andrew A. Lozyniak
                                        Title:   Treasurer and Secretary
                                                 (Chief Accounting Officer)

                                       18